Deflation virus is moving the policy test beyond the 1930s extremes

And I still say we will see hyperinflation very soon. The current policies of the Fed are doomed.

Just look who profits the most of these interventions….and suddenly the greater picture suggests that the Fed wants to destroy the dollar and the economy (especially the middle class) intentionally.

Do some research – if you not already have – on who created the Fed and find out the ulterior motive of this monster from Jekyll Island. You may watch Zeitgeist, The Movie, Final Edition especially Part III of the movie which starts at 1:14:30 .

The Fed is creating ‘the worst case scenario’ and it is absolutely correct that we are beyond the extremes of the 1930s.”
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Debt deflation is tightening its grip over the entire global system. Interest rates are creeping towards zero in Japan, America, and now across most of Europe.

We are beyond the extremes of the 1930s. The frontiers of monetary policy are being pushed to limits that may now test viability of paper currencies and modern central banking.

You cannot drop below zero. So what next if the credit markets refuse to thaw? Yes, Japan visited and survived this policy Hell during its lost decade, but that was a local affair in an otherwise booming global economy. It tells us nothing.

This time we are all going down together. There is no deus ex machina to lift us out. Certainly not China, which is the most vulnerable of all.

As the risk grows, officials at the highest level of the British Government have begun to circulate a six-year-old speech by Ben Bernanke – at the time of its writing, a garrulous kid governor at the US Federal Reserve. Entitled Deflation: Making Sure It Doesn’t Happen Here, it is the manual of guerrilla tactics for defeating slumps by monetary means.

“The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost,” he said.

Critics had great fun with this when Bernanke later became Fed chief. But the speech is best seen as a thought experiment by a Princeton professor thinking aloud during the deflation mini-scare of 2002.

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Yield on 10-year Treasury debt below 3%

Liquidation, not deflation, is what is happening in the financial markets.
In the near future we will see hyperinflation.

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Financial markets notched up another historic milestone on Wednesday as the yield on 10-year US Treasury debt fell below 3 per cent for the first time in 50 years.

The decline in yields – to a low of 2.98 per cent – comes in response to unconventional policy measures taken by the US Federal Reserve this week aimed at pushing short-term and long-term interest rates lower.

This so-called “quantitative easing” is a strategy central banks use to fight deflation, the dreaded combination of declining growth and falling asset prices.

“It is astonishing [that yields are so low],” said Michael Chang, interest rate strategist at Credit Suisse. “The current environment is not like anything we’ve seen before. The Fed’s being very aggressive in quantitative easing, and the fall in yields is the result.”

Read moreYield on 10-year Treasury debt below 3%

OECD warns of worst recession since early 1980s

OECD says developed world could face worst recession since early 1980s; warns of deflation

LONDON (AP) — The financial crisis will likely push the world’s developed countries into their worst recession since the early 1980s, the Organization for Economic Cooperation and Development (OECD) said Tuesday.

In its half-yearly economic outlook, the Paris-based organization said economic output will likely shrink by 0.4 percent in 2009 for the 30 market democracies that make up its membership, against the 1.4 percent growth prediction for 2008. As a result, the OECD said it supported fiscal rescue measures, including tax cuts, provided they were targeted and temporary.

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INFLATION VS. DEFLATION… NOPE – STAGFLATION

By Krassimir Petrov, PhD:

Once again the Fed, the mainstream media, and Bubblevision continue to relentlessly propagate the myth that the slowing U.S. and global economy will ease inflationary pressures. In addition, the current Credit Crisis and the ongoing collapse in commodity prices have encouraged deflationists to reiterate their beliefs that deflation is inevitable. These views represent two different approaches of the same myth. Investors should not fall for it.

Given the recent fall in prices in a broad range of commodities, we are assured that inflation is no longer a problem, indeed that the real threat is deflation; inflation is supposedly transitory and inflationary expectations are “well anchored”. We are led to believe that “recessions cure inflations.”

Nothing can be further from the truth. On the contrary, given the current macroeconomic environment, the massive government stimulus of hundreds of billions of dollars in rebate checks and a series of bailouts will most certainly translate in much higher inflation and little or no economic growth. One must prepare for the reality that the government’s “cure”, as Peter Schiff has repeated so often, will be worse than the disease.

In coming years, investors must expect a lot more inflation and adjust their portfolios accordingly – their survival depends on it. Our job here is to outline the importance of the inflation-deflation debate, interpret its meaning, provide some historical evidence, and present the arguments for future economic development with its investment implications.

1. Importance of the Inflation-Deflation Debate

For any investor, the most important issue in today’s macroeconomic environment is the correct forecast of future inflation. Its essence boils down to strategic asset allocation. In a strong deflationary environment, the prices of stocks, commodities, and risky bonds fall; cash, cash equivalents, and safe bonds are the winning investments. On the other hand, in an inflationary environment, cash, cash equivalents, safe bonds, and most stocks rapidly lose value for two reasons – due to rising interest rates and due to loss of purchasing power; commodities, gold, and other tangible assets are the winning investments.

Read moreINFLATION VS. DEFLATION… NOPE – STAGFLATION